Working Paper

The potential impact of explicit Basel II operational risk capital charges on the competitive environment of processing banks in the United States


Abstract: Basel II replaces Basel I?s implicit capital charge on operational risk with an explicit charge. Certain U.S. banks concentrated in processing-related business lines ? which have significant operational risk ? could thus face an increase in overall minimum regulatory capital requirements. Some have argued that, as a result, these so-called ?processing banks? would be disadvantaged vis--vis competitors not subject to regulatory capital requirements for operational risk. This paper evaluates these concerns.

Keywords: Bank capital; Risk management; Basel capital accord;

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Basel II White Paper

Publication Date: 2005

Number: 4